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 COMMERCIAL IMPRACTICABILITY UNDER THE INDIAN LAW OF
CONTRACT: THE UNIDROIT PRINCIPLESAS THE WAY FORWARD?
Saloni Khanderia*

Abstract: The present era of heightened l iberalisation has encouraged an increasing

number of jurisdictions across the globe to offer some respite to the parties to a contract
when they experience a subsequent and unforeseen change in circumstance in the form
of hardship. However, there is sufficient judicial dicta in India - a common law
jurisdiction - to detect a certain hostility to recognising any such situation that is short
of impossibility within the definition of section 56 of the Indian Contract Act 1872. The
blind application of traditional common law principles has proven to be unsuitable to
resolving the predicaments arising in modern-day contracts, which are often affected
by inflation and other legal or political changes that have the potential to alter the
contracted price of performance to the detriment of one party. The present author
suggests that the Indian courts should begin to refer to the International Institute for the
Unification of Private Law-s (UNIDROIT) approach espoused in its Principles on
International Commercial Contracts (the UPICC). Unlike the Indian law of contract
the UPICC adopts a dichotomy between the theories of hardship and force rmjeure,
and consequently provides different solutions to address these matters. Employing the
UPICC as a gap-filler will assist the Indian courts in interpreting these issues according
to well-defined and internationally accepted standards so that the parties can receive
fair and adequate relief when the performance of their contract has been affected by
hardship.

A. INTRODUCTION
The principle of the sanctity of contracts has been envisaged in the traditional legal
doctrine pacta sunt servanda, which means that agreements must be respected. This
principle has been uniformly adhered to in civil and common law jurisdictions, and is
commonly considered to mandate the strict performance of contracts.1 Although the
principle reinforces certainty and stability in contractual obligations, its rigid
application may sometimes run counter to the principles of reasonableness, justice and
good faith when extenuating supervening circumstances render the performance of the
contract problematic. 2 In such cases these generally recognised legal principles may
favour relief, whether in the form of amendment to the terms of the agreement,

*Associate ProfessorJ indal Global Law School and Deputy Controller of ExaminationsJ indal Global
University. E-mail: skhanderi a@jgu.edu.in.
1 See:Vienna Convention on the Law of Treaties, art 26 in relation to international law; Sapphire v
National Iranian Oil CormpanyArbitral Award of March 15, 1963, ILR1967, 136, 181; LibyanArrerican
Oil Company (LIAMCO) v Libya, Arbitral Award of 12 April 1977 Y CA 1981, 89, 101; and Andrew
Kull, :Mistake, Frustration, and the Windfall Principle of Contract Remedies (1991) 43 Hastings Law
Journal 1,6.
2Daniel Girsberger and Paul i us Zapol skis, : Fundamental Aiteration of the Contractual Equi li bri urn under
Hardshi p Exemption- (2012) 19(1) J urisprudence/J urisprudencij a 121, 123.
 Corrrmrcial Irmpracticabil ity under the Indian Law of Contract: The UNID ROIT
Principles as the Way Forward?
renegotiation, or the suspension or discharge of contractual obligations. Jurisdictions
across the globe have, therefore, come to rely on the principle clausula rebus sic
sta nti bus 3 to allow exceptions for drastic situations where the foundation of the contract
is destroyed.4 Such deviations have been considered necessary to accommodate to
sudden and unforeseen changes, which could not have been contemplated by the parties
during the conclusion of the contract. Civil and common law jurisdictions have,
respectively permitted such deviation from the strict performance of their contractual
obligations to accommodate to changes that have eventually rendered the contract
impossible to perform under the doctrines of force rmjeure and frustration of contract.s
However, some legal systems, and in particular civil lawjurisdictions, have additionally
recognised the principle of hardship or commercial impracticability as a point of
departure from the rigid application of pacta sunt survanda to accommodate to
supervening circumstances that have merely rendered performance more onerous but
not impossible. In contrast, this practice does not seem to have found favour under the
traditional principles of the English law of contract which other common law
jurisdictions such as India also follow.
In this respect, the International Institute for the Unification of Private Law
(UNIDROIT), 6 which is an independent inter-governmental organisation in Rome,
offers a feasible alternative approach to :hardship- via its Principles on International
Commercial Contracts (the UPICC). In particular, the UPICC, which were first
formulated in 1994 and which were recently revised in 2016, 7 serve as a restatement of
international contract law that endeavours to harmonise and modernise the rules

: For ahi story of the principle, see generally,J ames Gordley, :Impossi bility and Changed and Unforeseen
Circumstances- (2004) 52 A mericanj ournal of Comparative Law 513. Also see, Vienna Convention on
the Law of Treaties 1969, art 62, which stipulates the principle of rebus sic stantibus in the context of
internati onal Iaw.
4 Christina Ramberg, :The UNIDROIT Principles as a Means of Interpreting Domestic Law-(2014) 19
Uniform Law Review/ Rev. dr. unif. 669, 671.
1 See generally, Michael G Rapsomanikas, :Frustration of Contract in International Trade Law and
Comparative Law'(1979-1980) 18 Duquesne Law Review 551.
6 For a more detailed understanding on the structure of UNID ROIT, see, Jan Kropholler, Internationales

Einheitsrecht: Allgerreine Lehren (Mohr Siebeck 1975) 57-59 (translated from the German original);
Stefan V ogenauer, :Introduction- in Stefan Vogenauer (ed), Corrrmentary on the UNID ROIT Principles
of International Corrrnercial Contracts (PICC) (2 nd edn, OUP 2015) 7-15; and UNIDROIT, History and
Overview- (UNIDROIT, 29 August 2018) <www.unidroit.org/about-unidroit/overview> accessed 16
October 2017.
7See, UNIDROIT Governing Council, :Summary of Conclusions- 95th Session Rome 18-20 May 2016,
C.D. (95) Misc. 2. Also see UNIDROIT Governing Council, :Adoption of Additional Rules and
Comments to the UNIDROT Principles of International Commercial Contracts concerning Long-Term
Contracts, 95th Session, Rome [18-20 May 2016].
 UC Ljournal of Law andJ urisprudence

governing commercial contracts. 8 They may potentially serve as a gap-filler in the

national law of contract where the latter does not contain an appropriate solution on a
particular question; orasa model law for a country that is looking forward to update its
statutes. 9 As Michaels reports, several jurisdictions across the globe have considered
and have relied on the provisions of the UPICC while reforming their domestic laws. 10
Spain, Lithuania, the Czech Republic, Slovakia, Ukraine, Hungary, Brazil, Argentina
and Russia are some examples of such legal systems that have drawn inspiration from
the UPICC. 11 The purpose of this paper is to accordingly analyse the relevance of the
UPICC-s approach on hardship in modernising the Indian position on commercial
impracticability or hardship. The structure of this paper will be as follows: section B
will provide acomparative overview of the international best practices on hardship, and
focus in particular on the UPICC-s provisions on the subject; and section C will
examine the Indian approach towards hardship and evaluate the need for the country to
employ the UPICC to interpret, supplement or develop the law on this subject Section
D will offer concluding remarks and the author-s suggestions for change.

B. INTERNATIONAL BEST PRACTICE ON HARDSHIP: AN OVERVIEW

Although the definition of hardship varies among legal systems, the principle typically
refers to any change in circumstances after the conclusion of the contract, which does
not render performance impossible but rather severely alters the equilibrium between
the parties.12 These circumstances may be a result of any sudden legal, political or

8See the preamble to the UPICC, which describes itself as :the Pri nci pies [which] set forth general rules
for international commercial contracts7. Also see Michael J Bonell, An International Restatement of
Contract Law The UNIDROIT Principles of International Commercial Contracts (3rd edn,
Transnational Publishers 2005) 9 et sea; and Vogenauer (n 6) 5.
9The preamble to the UPICC, para 7, alongside official comment 7 to the concerned provision, para 7.
Also see Bonell, An International Restatement of Contract Law (n 8) 16, 244-246. For a list of national
Iegi slati on and International Conventi ons that have used or can potenti ally employ the UPIC C as a model,
see Ral f Michael s,: Purposes, legal nature and scope of the PICC - in Stefan V ogenauer (ed), Cormrmenta ry
on the UNID ROIT Pri nci ples of International Cormercial Contracts (PICC) (2nd edn, OU P 2015) 93
et seq.
10M ichaels, :Purposes, legal nature and scope of the PICC -(n 9) 100 et seq.
11ibid.
12 See for instance, Principles of European Contract Law (KIuwer International Law, 1999) (PE CL 1999)
art 6.111; Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of
Reference, Prepared by the Study Group on a European Civil Code and the Research Group on EC
Private Law (Sellier 2008) (DCFR 2008) art III-1.110; ICC, :International Chamber of Commerce
Hardship Clause 2003- (ICC, 2003) <www.i ccwbo.org/publ icat on/ cc-force-majeure-cl ause-2003i cc-
hardship-clause-2003/> assessed 1 November 2017 (ICC Model Clause, 2003); and United Nations
Convention on Contracts for the Internati onal Sale of Goods (CISG) art 79. AIso see Ole Lando & Hugh
Beale, :Principles of European Contract Law - Full Texts of Parts I and II combined- (Kluwer Law
International 2000) 322-328; Ingeborg Schwenzer in Peter Schlechtriem and Ingeborg Schwenzer (eds),
 Corrrmercial Irmpracticabil ity under the Indian Law of Contract: The UNID ROIT
Principles as the Way Forward?
economic changes in acountry where performance issupposed to take place, and which
in turn significantly increases the agreed cost of implementing the contractual
obligations or diminishes its value.
1. Contractual practice on hardship: A Comparative Overview
The acceptance of the doctrine of hardship has varied across civil law and common law
jurisdictions. Therefore, while civil law systems have generally adopted a dichotomy
in proposing solutions for changed circumstances that have resulted in the contract
becoming more onerous to perform and those which have resulted in total impossi bility,
this development has not been followed by common law jurisdictions. In addition, the
United States prescribes its own hybrid solution to hardship, which does not resemble
the approach adopted by the civil orthe common law jurisdictions.
Among the civil law systems, the French legal system has historically
recognised the principle of hardship underthetheory of irnprliision.13 AIthough French
law initially restricted the application of the theory to administrative contracts, its scope
has over time been extended to other forms of contractual relationships provided that
the parties have expressly agreed to this effect.14 In addition, several other civil law
jurisdictions such as Austria, s Germany, 6 Greece,17 Italy,18 the Netherlands, 19
Portugal 20 and the Scandinavian countries2 also embrace the doctrine of hardship in
their respective laws to reflect the principle of good faith.22 In a related vein, the

Conmmentary on the UN Convention on the International Sale of Goods (CISG) (4 h edn, OUP 2016) art
79, para 4; Christopher Brunner, Force Majeure and Hardship under General Contract Principles:
Exemption for Non-Performance in International Arbitration (1s edn, Kluwer Law International 2009)
167; Girsberger and Zapolskis, (n 2) 122; Ingeborg Schwenzer, :Force Majeure and Hardship in
International Sales Contracts (2009) 39(4) Victoria University of Wellington Law Review 709, 712-
713; and Niklas LindstroOrrn :Changed Circumstances and Hardship in the International Sale of Goods-
(2006) Nordic Journal of Commercial Law 23-24. cf Sarah Howard Jenkins, :Exemption for Non-
performance: UCC, CISG, UNIDROIT Principles - A Comparative Assessment-(1998) 72 Tulane Law
Review 2015, 2025, which puts forward the view that art 79 of CISG does not incorporate the provision
of hardship.
13 See Ewoud Hondius and Hans Christoph Grigoleit (eds), Unexpected Circumstances in European
Contract
14
Law (1s edn, CUP 2011), 144-145.
See Schwenzer, :Force Majeure and Hardship- (n 12) 710, 711.
I5SeeAustrian Bagerliches Gesetzbuch (BGB), 1811, secs 936, 1052, and 1170a.
16 See German BGB, 1900, sec 313.
17
See Greek Civil Code, 1946, art 388.
18See Italian Codice Civile, 1942, art 1467.
19 See Dutch Civil Code, 1992, art 6:258.
20 See Portugal Civil Code, 1966, art 437.
21
See PECL 1999, art 6.111.
22 Compare with Hans Smit, : Frustration of Contract A Comparative Attempt at Consolidation- (1958)
58 Col umbi a Law Review 287, 289-296, which throws light on the Swiss practice i n upholding the theory
of hardship. A Iso seeJ oseph M Peri IIo, :Force Maj eure and Hardshi p under the UNID ROIT Pri nci pl es
of International Commercial Contracts (1997) 5 TulaneJ ournal of International and Comparative Law
 UC LJ ournal of Law andJ urisprudence

Principles of European Contract Law, 1999 (PECL) 23 and the Draft Common Frame of
24
Reference, 2008 (DCFR) also contain similar provisions in this respect The rules on
hardship in the civil law systems do not forgive non-performance but instead call upon
the parties to renegotiate the terms of their agreement to accommodate to the changed
circumstances, where these have fundamentally altered the equilibrium 25 Further, the
courts in most of these jurisdictions are empowered to adapt the contract when such
renegotiation has not been viable for some reason; 26 or terminate the contract if the
court was unable to find any just and reasonable solution.27 That said, these systems do
not equate hardship with impossibility of performance, which is espoused in the
doctrine of force rmjeure. 28 The latter extends to situations attributable to vis major
(meaning: superi or force) or the act of God, 29 and thus exonerates the parties from any
liability for non- performance.30
On the other hand, the United States :flirts with a vaguely defi ned doctri ne of
hardship,31 which it calls :impracticability-. This jurisdiction seemingly equates

5; Girsberger and Zapolskis (n 2) 122; and Schwenzer, :Force Majeure and Hardship-(n 12) 711-713 for
examples of countries and international instruments that accept the modern approach to hardship.
23 PECL 1999, art 6.111(2).
24 DCFR 2008, art 111-1:110(3)(d).
25
See PECL 1999, art 6.111(2); DCFR 2008, art 111-1:110(3)(d); and ICC Model Clause, 2003 (n 10).
Also see, Brunner (n 12) 480-481. But see, German BGB 1900, art 313; Italian Codice Civile 1942, arts
1467-1469; and Dutch Civil Code 1992, art 6.260, which do not obligate the parties to renegotiate the
contract on account of hardship. Also see, Schwenzer, : Force Majeure and Hardship-(n 12) 722.
26 PECL 1999, art 6.111(2); DCFR 2008, art III-1:1 10(3)(d); and ICC Model Clause, 2003 (n 12). Also
see, Brunner (n 12) 480-481. cf Dutch Civil Code, art 6.5.3.11 which highlights the reluctance of the
Dutch courts i n adapti ng the contract on account of hardshi p.
27 ibid.
28 For a detailed discussion on force majeure in civil law jurisdictions, see, Marel Katsivela, :Contracts:
Force Maj eure Concept or Force Maj eure C Iauses? (2007) 12(1) Uniform Law Review / Rev. dr. unif.
101, 112. Also see generally, Schwenzer, : Force Majeure and Hardship-(n 12) for a detailed discussion
on the difference between force maj eure and hardship.
29 See for instance, Italian Codice Civile, art 1218; Dutch Civil Code, art 6.75; German BGB, arts 275
and 326, which by default restrict the applicability of its provisions on :impossibility- to acts of God.
Consequently, the parties are under a mandate to expressly i ncl ude other events such as war and strike
in their contractual terms. Cf French Civil Code, art 1148; Quqhec Civil Code, art 1470; Greek Civil
Code, art336, PECL 1999, art8.108; and DFCR 2008, artIII-3:104, which by default extend the doctrine
of force majeure to any i mpedi ment-i ncl uding those that are internal to a contractual party-s sphere of
risk, such as war and strike. See Caslav Pejovic, :Civil Law and Common Law: Two Different Paths
Leading to the Same Goal (2001) 32 Victoria University of Wellington Law Review 817.
30 See Barry Nicholas, :Force Majeure and Frustration- (1979) 27 Americanj ournal of Comparative
Law 231, 239; Larry A. Dimattei and LucienJ Dhooge, International Business Law: A Transnational
Approach (2r d edn, Cengage Learning 2004) 134; Perillo, :Force Majeure and Hardship under the
UNIDROIT Principles of International Commercial Contracts-(n 22) 5, 6; and Sarah HowardJenkins,
:Exemption for Nonperformance: UCC, CISG, UNIDROIT Principles - A Comparative Assessment-
(1998) 72 Tulane Law Review 2015, 2020.
31Perillo, :Force Majeure and Hardship under the UNIDROIT Principles of International Commercial
Contracts (n 22), 112; and John D Calamari and Joseph Perillo, The Law of Contracts (3rd edn
Westgroup, 1987) 13-19.
 Corrrmercial Irmpracticabil ity under the Indian Law of Contract: The UNID ROIT
Principles as the Way Forward?
hardship with impossibility, whereby circumstances that have made the contract more
onerous to perform constitute grounds for discharge when the agreement has been
rendered useless or radical ly different from the parties- contemplation at the ti me of the
conclusion of the contract.32 In this respect, section 2-615 of the Uniform Commercial
Code, 1978 (UCC), which isapplicable(at least in part) to all of thefifty states and 261
of the Restatement Second (2d) of Contracts, 1981 accordingly employ the principle of
impracticability for the sale of goods and other forms of contracts under US law. As the
comments to the UCC and the Restatement 2d clarify, the occurrence of circumstances
such as :extreme or unforeseen difficulty, expense , or :a severe shortage of raw
materials or supplies due to war6 - may constitute impracticability only if they form
the basic assumption on which the contract was concluded and furthermore alter the
very nature of performance.33 In other words, a simple rise or fall in prices would not
amount to impracticability unless it was :well beyond the normal range- or :wholly
abnormal -.34
In comparison, the principles of the English common law exclusively determine
3
performance and non-performance by the doctrine of frustration of contract
Consequently, England does not recognise the theory of hardship and mandates the
strict adherence to the principle pacta sunt survanda. Typically, English courts will
refrain from acknowledging pure impracticability or hardship except when it results in
the frustration of the contract - for instance when the parties are unable to carry out the
contractual obligations for aconsiderable amount of time and subsequently experience
an increase in the cost of performance. 36 In this respect, judicial dicta demonstrate that
a change in circumstances that has rendered performance more onerous would not lead
to the discharge of the contractual obl igati ons, 37 unless the parties demonstrate at least

32 Mineral Park Land v Howard, 172 Cal 289, 156 P 458 [1956]; and Transatlantic Fin Corp v United
States, 363 F2d 312, 315 (DC Cir. 1966). For a detailed discussion on the concept of impracticability
under the US law of contract see generally, Michael A Schmitt and BruceA Wollschlager, :Section 2-
615 Commercial Impracticability: Making the Impracticable Practicable- (1976) 81 Commercial Law
Journal 9, 16; Linda Crandall, :Commercial Impracticability and Intent in UCC Section 2-615: A
Reconciliation- (1977) 9 Connecticut Law Review 266, 281; and Thomas Black, Sales Contracts and
Impracticability in a Changing World, (1981) 13 St. Mary's LawJ ournal 247, 290(1981).
33 See, UCC, Comment 4 to sec 2-615; Restatement 2d, Comment (d) to sec 261. Also see, Guenter
Treitel, Frustration and Force Majeure (3 rd edn, Sweet and Maxwell Publications 2014) 256 et seq.
I ibid. Also see, Treitel (n 33) 278, 289-290, which clarifies that :tenfold- increase in the cost would
constitute commercial impracticability with the meaning and scope of the U.S. law of contract
3s
36
SeeTreitel (n 33) 64, fora detailed discussion on the frustration of contract under the English law.
Acetylene Co of Great Britainv Canada CarbideCo [1921] 6 LI L Rep410 (KB). Also seeTreitel (n
33) 284-285.
37 British Movietonews Ltdv London and District Cinemas [1952] AC 166 (HL), 185 per Lord Simon;
and Wates Ltdv Greater London Council [1984] 25 BLR 1; and Treitel (n 33), 299-300.
 UC Ljournal of Law andJ urisprudence

a subsequent : hundredfold increase- in the prices.38 This implies that the common law
doctrine does not permit a contractual obligation to be excused from performance
unless it has either been rendered impossible,39 or has frustrated the purpose in such a
manner that literal performance, although possible, has become fundamental ly different
from the original contemplation of the parties, and thus the purpose of the contract is
defeated. 40 For this reason, the parties would not be discharged from their contractual
obligations on such grounds regardless of whether they have incorporated an express
stipulation to this effect via a force rmjeure clause in their agreement, which would
accordingly, be void.41
In summary, civil law jurisdictions adopt a rigid dichotomrry in their approach to
permitting a deviation from the strict performance of a contract. While parties may be
discharged from their obligations in case of impossibility to perform, the occurrence of
hardship mandates the renegotiation of the terms to accommodate to the changed
circumstances. The US, on the other hand, equates changed circumstances that have
resulted in impossibility with those that have merely rendered performance more
onerous, insofar as it permits the parties to be discharged in both these situations,
although it imposes a high threshold in terms of the extremity of circumstances required
for such an outcome. In comparison, the courts in the UK are mandated, under the
doctrine of frustration of contract only to acknowledge supervening changed
circumstances that have destroyed the very bargain that the parties have made, and thus
refrain from providing respite when the performance has merely become more onerous.
2. The UNIDROIT-s Solution to Hardship
With the UPICC, the UNIDROIT offers a practical and sustainable solution on
commercial impracticability or hardship to assist lawmakers and courts to interpret,

38 Brauer & Co (Great Britain) LtdvJ ames Clark (Brush Materials) Ltd [1952] 2 LIoyd's Rep 147 (CA),
501 per Lord Denning. Also see, Treitel (n 33) 282, which opines that the phrase: hundredfold increase-
refers to a fantastic and unlikely conti ngency.
39 See Taylor v Caldwell, 122 Eng Rep 309 (QB) 1863, which is the landmark verdict on the English
doctrine of impossibility. Also see, Treitel (n 33) 69, 74.
40 See Krell v Henry [1903] 2 KB 740, which is the seminal case on :frustration of purpose- under the
English law of contract. See also Treitel (n 33) 65-66.
41 See Thames Valley Power Ltd v Total Gas and Power Ltd [2005] EW HC 2208; and Tandri n Aviation
Holdings Ltd v Aero Toy Store LLC, [2010] EWHC 40. cf the earlier verdict of Brauer & Co (Great
Britain) Ltd vJ ames Clark (Brush Materials) Ltd [1952] 2 Lloyd's Rep 147 (CA) 501 (Lord Denning)
which stated that an escalation in the cost of performance by a :hundredfold would discharge the seller
from the performance under the doctrine of :frustration of the contract- by bringing the force majeure
clause into operati on.
 Corrrmercial Irmpracticabil ity under the Indian Law of Contract: The UNID ROIT
Principles as the Way Forward?
42
supplement or develop legislation according to internationally accepted standards.
The UPICC -s significance lies in the fact that although they are in the form of soft
law,43 they are apolitical and are not drafted by government officials, but rather by
experts in the field in their private capacity. 4 In relation to the subject of hardship, the
UPICC offer neutral clarifications insofar as they draw inspiration from jurisdictions
across the globe to reflect the values of both the civil and the common law systems.4
They therefore adopt rules that are recognised in most legal systems and are
46
consequently not tilted in favour of any country-s specific interests.
The UPICC embrace a rigid dichotomy between the principles of force rmjeure
and hardship. The UPICC-s provision on force rmjeure is included in its chapter on
non-performance. A disadvantaged party may be excused from performance due to the
occurrence of a supervening event if it is able to prove the existence of force rmjeure
via article 7.1.7 of the UPICC. Although force rmjeure pertains to impossibility to
perform, it is not limited to events that are attributable to acts of God or vis major.
Instead, the scope of article 7.1.7 extends to the occurrence of any impediment that was
beyond the party-s control, 47 and which it :could not reasonably be expected to have
taken into account at the time of the conclusion of the contract, or to have avoided or
overcome it or its consequences-. 48 The parties to a contract may, in such
circumstances, terminate the contract and withhold performance due to such

42 See UPICC, para 6 of Preamble, read along with Official Comment 6 to the concerned para; and Ralf
Michaels, :The UNIDROIT Principles as Global Background Law-(2004) 19 Uniform Law Review /
Rev. dr. unif. 643, 655-656. Also see generally, Dimattei and Dhooge, (n 30) 236; Eckart Br2dermann,
:The Growing Importance of the UNIDROIT Principles in Europe - A Review in Lightof MarketNeeds,
the Role of Law and the 2005 RomeI Proposal (2006) Uniform Law Review! Rev. dr. unif. 749; and
Michael J Bonell, :An International Restatement of Contract Law- (28 October 2011) Georgetown
University Law Centre for Transnational Business and the Law: Symposium on the 2010 UNIDROIT
Principles of International Commercial Contracts: Towards a 'Global- Contract Law, 22-24
<www.law.georgetown.edu/cle/materials/unidroit/2011.pdf> accessed 2 November 2017.
43 Non-binding legal principles are commonly referred to as :soft law7. Bonell defines :soft law as
:general instruments of normative nature with no legally binding force and which are applied only
through voluntary acceptance-. See, Micheal J Bonell, :Soft Law and Party Autonomy: The case of the
UNIDROIT Principles-(2005) 51 Loyola Law Review 229, 229. Also see, Sieg Eiselen, :Globalization
and Harmonisation of International Trade Law- in Faure and Van der Walt (eds) Globalization and
Private Law: The Way Forward (1st edn, Edward Elgar2008) 97, 123-125.
4 See Alan Farnsworth, :The American Provenance of the UNIDROIT Principles- (1998) 72 Tulane
Law Review 397, 397; and Bonell, An International Restatement of Contract Law (n 8) 16, 33.
41 For a more detailed understanding on the U PICC, seeV ogenauer, (n 6) 7-30; Bonell :An International
Restatement of Contract Law-(n8) 305 et sea; and MichaelJ Bonell, :Towards a Legislative Codification
of the U NIDROIT Principles-(2007) Uniform Law Review / Rev. dr. unif., 233.
46 See Farnsworth (n 44) 397; and Bonell, An International Restatement of Contract Law (n 8) 16, 33.
4 U PICC, Official Comment 1 to art 7.1.7.
4 ibid; art 7.1.7(1) read along with illustration 1(1) to the concerned provision.
 UC Ljournal of Law andJ urisprudence

impediments, 49 provided that the supervening event was unforeseeable and beyond the
parties sphere of allocated risk.s° Appropriately, if such impediment istemporary, non-
performance on account of force rmaj eure would merely be excused as long as the effect
of such event lasts.s
As regards hardship, the UPICC incorporate the common law's preference for
the strict adherence to the principle pacta sunt survanda as a basis but further
accommodate to unique and extenuating circumstances that may potentially render
performance more onerous but not impossible. In this context, article 6.2.1 stipulates
that each party is bound to perform its obligations irrespective of whether :the
performance has become more onerous for one of the parties-, s 2However, article 6.2.2
subsequently qualifies this principle of sanctity of contracts by clarifying that the parties
would not be obligated to adhere to the terms of the agreement if they experience
hardship. Such hardship should manifest itself through the occurrence of an event which
fundamentally alters the equilibrium of the contract either because the cost of a party 's
performance has increased or because the value of the performance a party has received
has diminished-. The occurrence of any of these events must occur or become known
to the disadvantaged party after the conclusion of the contract. Furthermore, such a
change in circumstances should be beyond the control of the disadvantaged party s3 and
of such a nature that the party coul d not have reasonably taken the same into account at

49 U PICC, art 7.1.7(4).

50 Pascal Pichonnaz, :Non-performance in General- in Stefan V ogenauer (ed), Comrrentary on the
UNIDROIT Principles of International Comrrercial Contracts (PICC) (2nd edn, OUP 2015) 871 et seq.
51 U PICC, art 7.1.7(2). cf Hans Van Houtte, :The UNIDROIT Principles of International Commercial

Contracts (1995) International Trade and Business Law 13, 18, which opines that the circumstances to
determine
5
temporary impossibility may not always be clear.
2 Alsosee UPICC, Official Comment 1 toart 6.2.1; Ewan McKendrick, :Hardship-in StefanV ogenauer
(ed), ConTentary on the U NID ROIT Principles of International Conrrercial Contracts (PICC) ( 2 nd edn,
Oxford University Press 2015) 812-813; and Houtte, (n51) 13. Also see, the ICC International Court of
Arbitration (Zafich), Arbitral Award No 8486 (1996),; the ICC International Court of Arbitration,
Arbitral Award No. 9479 (1999) (parties unknown)LDelta Corrercializadora de Energia Ltda v AES
Infoenergy Ltd, the Court of C'mara FGV de Concilia' 2o e Arbitragem (S2o Paulo, Brazil), Arbitral
Award No. 1 of 2008 (2009)_Insurance Company Provita vJ oint-Stock ConTnercial Bank Forum, Kyiv
Regional Commercial Court, Ukraine (2009), G Brenci us v 'U kio investici ne grupe_, Supreme Court of
Lituania (2003)Lthe Tribunal de Contas da Unil 2 o, Brazil (2011), which also underscore the general
duty to perform unless there is a fundamental alteration in the original contractual equilibrium as
provided in UPICC, art 6.2.1.
53 U PICC, art 6.2.2(b) read along with Official Comment 3(b) to art 6.2.2(b); and McK endrick (n 52) 43,

817.
 Corrrmercial Irmpracticabil ity under the Indian Law of Contract: The UNID ROIT
Principles as the Way Forward?
the time of formation of the contract.s In a related vein, the disadvantaged party must
prove that it did not assume the risk of such an event.ss
Although the parameters for determining the circumstances that constitute a
:fundamental alteration-are nebulous,S6 the Official Comments illustratethatthis could
either beduetoa dramatic rise in the price of the raw materials that are required for the
production of the contracted goods; because of an increase in the cost of the services
that need to be rendered; or as a consequence of an introduction of new safety
regulations.S7 Such effects are thus most likely to be experienced by the party that is
obliged to perform the non-monetary obligations. S8 In a related vein, dramatic inflation
or afrustration of purpose that isattri butabl eto sudden changes in the market conditions
would also constitute hardship under the UPICC insofar as these diminish the value of
performance that one party was entitled to receive under the contract.s
Upon the determination of hardship, the UPICC further entitles the
disadvantaged party to the right to request the renegotiation of the terms of the contract
via article 6.2.3. However, intervention by a court is permissible if such renegotiations
are unsuccessful. 60 In such situations, the court may adapt the contract :to restore its
equi libri um-'and to achieve a:fair distribution of the Iosses between the parties .61 Such
adaptation may either mandate a modification of the agreed prices; changes in the
quantity to be delivered; a change in the means, method or duration of performance; or
require a compensatory adjustment.62 Alternatively, the court may order the termination
63
of the contract if such adaptation is unfeasible.

I ibid art 6.2.2(c) read along with Official Comment 3(c) 216; and McKendrick (n 52) 43, 818.
55 ibid art 6.2.2(d) read along with Official Comment 3(d) 216; and McKendrick (n 52) 43, 818. cf Hans
Stoll and Georg Gruber, :Article 79-in Peter Schlechtriem & Ingeborg Schwenzer (eds), Commentary
on the UN Convention on the International Sale of Goods ( 2 nd edn, OU P 2005) art 79 para 22; Bonell,
An International Restatement of Contract Law (n 8) 220, 393, referring to United States v Wegermatic
Corp, 360 F.2d 674, 676 (2d Cir. 1966) (Henry FriendlyJ); Denis Tallon, :Article 79-in Cesare Bianca
and Michael Bonell (eds), Corrrnentary on the International Sales Law: the 1980 Vienna Convention
(Giuffr. 1987) art79 para 2.6.3.
56 But see Brunner (n 12) 428 et seq; Girsberger and Zapolskis (n 2) 126 et seq; Schwenzer :Force

Majeure and Hardship- (n 10) 716, which provide suggestions as regards the circumstances that would
fundamentally alter the equili bri um of the contract-.
57 U PICC, Official Comment 2 (a) to art 6.2.2.
58 ibid.
51 ibid, Official Comment 2(b). Also see, Cherkassy Branch of OJ SC Kredobank v Individual

entrepreneur 2, Cherkasy Regional Commercial Court, Ukraine (2009) and Wirtgen Ukraine v TOV
VAB Leasing, the Kyiv Commercial Court of Appeal, Ukraine (2010),
60 See UPICC, art 6.2.3(4)(a)-(b).
61 U PICC, Official Comment 7 to art. 6.2.3(4); and McKendrick, (n 52) 43 821.
62 B runner (n 12) 3 referring to Lando/Beale, PE CL 1999, Comment D on art 6.111, 327.
63 See UPICC, Illustration 5 to Official Comment to art 6.2.3(4).
 UC Ljournal of Law andJ urisprudence

This being the case, under normal circumstances the UPIC C does not advocate
the discharge of the parties from performance merely on the grounds of hardship. 64 In
this respect, it reaffirms civil law-s practice insofar as it endeavours to keep the contract
alive as far as practicable.65 The UPICC thus also adopt a more liberal and
contemporary approach in comparison with the English law of contract which
considers frustration of purpose as a ground for discharge and further does not
66
acknowledge any changes which merely render performance more onerous.

C. THE THEORY OF HARDSHIP UNDER THE INDIAN LAW OF CONTRACT

In India, every domestic dispute arising from the performance and non-performance of
a contractual obligation - regardless of whether it involves a government, private
enterprise or an individual - is governed by the Indian Contract Act 1872. In addition,
that legislation also regulates disputes arising from transnational contracts, when the
proper law is that of India.
The Indian Contract Act 1872 does not contain any specific provision on
hardship. Instead, support for hardship is confined to judicial dicta, which indicate that
the paradigms of the subject shall be assessed within the parameters of the principles
of discharge by the frustration of contract. In particular, paragraph two of section 56 of
the legislation which ispredicated on the Engl ish law regulates the subject of frustration
and provides:
a contract to do an act which, after the contract is made, becomes impossible,
or, by reason of some event which the promisor could not prevent, unlawful,
becomes void when the act becomes impossible or unlawful.
A contract is thus said to be frustrated under section 56 of the Indian Contract
Act 1872, when discharge has occurred either due to impossi bil ity or when performance
becomes radically different from the original contemplation of the parties. 67
Impossibility or force rmjeure under the Indian law of contract is subject to the express
stipulations of the parties- agreement but is not merely limited to acts of God or vis
major. Instead, force rmjeure extends to all other unforeseeable supervening events

64 But see, U PICC, art 6.2.3(4), which permits termination as a last resort.
61 See Official Comment 6 to art 6.2.2 of the UPICC.
66 See Krell v Henry [1903] 2 KB 740; and Treitel (n 33) 65-66.
67 Satyabrata Ghose v Mugneeram Bangur & Co [1954] SCR 310. Also see, Nilima Bhadbhade (ed),
Pollock and Mulla on the Indian Contract and Specific Relief Acts (1 edR Lexis Nexis Publications
2014) 871-872. Also see Treitel (n 33) 64-66.
 Cormrcial Irmpracticabil ity under the Indian Law of Contract: The UNID ROIT
Principles as the Way Forward?
that the parties cannot prevent by any amount of human care and diligence.68 In this
respect, the Supreme Court has, inthe semi nal case of Satyabrata Ghose v Mugneera m
Bangur & further clarified that the application of paragraph two of section 56 of
Co, 6 9
70
the Indian Contract Act 1872 is not restricted to physical or literal impossibility.
While commenting on the Government-s temporary requisitioning of land for military
purposes, Mukherj ea J opi ned that the courts could additional ly employ secti on 56 to
regulate instances of commercial impracticability, but only when performance has
become:
useless from the point of view of the object and purpose which the parties had
in view; and if an untoward event or change in circumstances totally upsets the
very foundation upon which the parties rested their bargain.71
The Indian law of contract istherefore akin to the English common law insofar
as it disregards the occurrence of frustration of the contract on account of pure
commercial impracticability or hardship unless the changed circumstances have
affected the very bargain that the parties made, and rendered the performance
impossible in the time and manner contemplated.72 For this reason, section 56 of the
Indian Contract Act 1872 does not permit the parties to be relieved merely on account
of an alteration in economic circumstances, which only renders the performance more
onerous, for instance, due to a price rise or fall. Consequently, the Supreme Court in
Alopi Parshad & Sons Ltd v Union of India 73 disregarded the appellantis plea to invoke
the doctrine of frustration of contract when, due to the changed circumstances caused
by the Second W orl d War, the agreement became more burdensome to perform due to
an abnormal increase in the prices of ghee, which was initially supposed to be supplied
at a fixed rate. 74 ShahJ reaffirmed that the change in circumstances in question did not

68See the verdict of the Supreme Court in Dhanrajarmal Gobi ndramv. Sharnji Kalidas & Co, AIR 1961
SC 1285, [17]-[19], referring tothe decision of the English courts in Lebeaupin v. Richard Crispin & Co
[1920] 2 KB 714. Also see, Bhadbhade, (n67) 871, 915; and AvtarSingh, Law of Contract A Study of
the ContractAct 1872 and Specific Relief (I 2 th edn, Eastern Book Company 2017) 402-403.
69 [1954] SCR 310.
70
AIR 1954SC 44.
71 ibid [9].
72 ibid. Also see Sachindra Nath v Gopal Chandra, AIR 1949 Cal 240; Parreshwari Das Mehra v Ram

Chand Om Prakash, AIR 1952 Punj 34. Also see FA Tarrplin Steamship Co Ltd v Anglo-Mexican
Petroleum Products Co Ltd (1916) 2 AC 397; Cricklewood Property and Investment Trust Ltd v
Leighton-s Investment Trust Ltd [1945] AC 221 (HL);J oseph Constantine Stearrhip Line Ltdv Imperial
Smelting Corpn Ltd [1942] AC 154 (HL); British Movietonews Ltd. v. London and District
Cinemas [1950] 2 All E.R. 390 (CA)166; Davis Contractors v Fareham Urban District Council [1956]
AC
73
696; Krell v Henry [1903] 2 K B 740; and Treitel (n 33) 65-66 on the frustration of purpose.
AIR 1960 SC 588
74 ibid.
 UC LJ ournal of Law andJ urisprudence

in itself affect the bargain' that the parties had made.75 He further observed that the
doctrine of frustration as enshrined in section 56 of the Indian Contract A ct 1872 would
only come into play when the performance has eventually become impossible or
unlawful and not merely altered.76 The court further accentuated that it was not
endowed with any :general Iiberty-to :absolve a party from liability to perform his part
of the contract merely because, on account of a contemplated turn of events, the
77
performance of the contract may become onerous-.
Shah J 's opinion has continued to represent the judicial view in India by the
mandate enshrined in article 141 of the Constitution of India 1950, which mandates that
:the law declared by the Supreme Court shall be binding on all courts within the
territory of India- . The Supreme Court has continued to express similar hostility in a
78
line of other cases, such as Continental Construction Co Ltd v State of MP,
Travancore Devaswom Board v Thanath International; 79 and more recently in Bharti
Cellular Lirrited v Union of India. 80 Consequently, while rejecting a partyis appeal for
adaptation of the agreement due to hardship, Banumathi J of the Madras High Court
stressed that it was asettled principle that the Indian ContractAct 1872 does not enable
the parties to ignore express stipulations and renegotiate the contract on some :vague
plea of equity -8 1 Hence, although the change in ci rcumstance was : compl etely outside
the contemplati on of parties -at the ti me of the conclusion of the contract, it would not
82
enable the court to sanction departure from the express terms of the contract
1. Commercial hardship and force majeure clauses
In subsequent cases, the parties expressly incorporated the occurrence of certain
supervening circumstances, which could plausibly render the performance more
onerous, in the force rmjeure clause of their agreement In such instances, one may
assume that India, being influenced by the English common law of contract would
disregard the mere inclusion of such clauses as a shield from performance unless the

71 ibid, [4]. Also see British Movietonews Ltdv London and District Cinemas [1950] 2 All E.R. 390
(CA), 185.
76 ibid.
77 ibid.
78
AIR 1988SC 1166.
79 (2004) 13 SCC 44.
80 (2010) 10 SCC 174.
81Sree Kamatchi Amman Constructions v The Divisional Railway Manager-Works, Palghat Division,
OSA Nos 109 & 247 of 2005, [38].
82 ibid. Also see, Indian Contract Act 1872, sec 62 which prohibits the parties to make any variance to
the existing terms of their agreement except by the conclusion of a new contract.
 Corrrmercial Irmpracticabil ity under the Indian Law of Contract: The UNID ROIT
Principles as the Way Forward?
supervening event has frustrated the very purpose of the contract 83AI though the parties
could regulate force rmjeure situations in the contract, they could not expand the
availability of relief to apply to less extreme supervening events. However, the judicial
dicta in India have failed to provide any clear illustration of the exact legal position in
this respect.
For instance, in a dispute before the Del hi High Court in Coastal Andhra Power
Lirrited v Andhra Pradesh Central Power Distribution Co. Ltd & Others,8 the parties
expressly stipulated that they would be discharged if the performance of their
obligations was :prevented, hindered or delayed- due to a force rmjeure event that
triggered inter alia changes in the cost of materials required. 8S In this case the contract
pertained to the long-term supply of coal from Indonesia ata fixed price of USD 24 Per
Metric Ton (PMT). 86 As a result of the promulgation of a new Indonesian Regulation
in 2010, the prices of coal escalated by 150 percent viz. from the contracted rate of
USD 24 PMT to USD 60 PMT. 87 The supplier, namely Coastal Andhra Power Ltd
(CA PL), subsequently issued a notice in 2011 to the respondent claiming to be released
under the force rmjeure clause. CA PL asserted that the performance of the project had
:become unviabl e- due to the: exponential increase in coal prices- as a consequence of
88
a sudden and unforeseeable change in the law.
Rejecting these contentions, Mural idhar J opined that Indian law would not
permit the parties to be discharged, irrespective of the constructi on of the force rmjeure
clause in question, since the change in circumstance did not ultimately prevent them
from performing their obligations. Instead, the parties should :generally factor in the
possibility of [a] sudden fluctuation in international prices- by incorporating :risk
purchase and like clauses- in their commercial contract 89 Accordingly, the
disadvantaged party could merely claim compensation for the loss suffered in such
circumstances. 90 Mural idharJ nonetheless remai ned silent as regards the parameters for
claiming such compensation - whether it would confer a right on the aggrieved party

83 Also see the verdict of the English court in British Movietonews Ltdv London and District
Cinermas [1950] 2 All E.R. 390 (CA), which expressed a similar opinion.
8 Decision of the Delhi High Court, OMP No. 267 of 2012 (decided on 2J uly 2012).
85 ibid [24].
86 ibid [5].
87 ibid [7].
88 ibid [7]-[8].
89 ibid [24]. Also seetheverdict of the English court in Tharres Valley Power LtdvTotal Gas and Power
Ltd [2005] EWHC 2208, which expressed a similar opinion.
90 ibid.
 UC LJ ournal of Law andJ urisprudence

to request a renegotiation of the contractual price, or instead exclusively empower the

court to adapt the contract.91 In any event it appears that all such claims to compensate
would be outside the scope of the present provisions of the Indian Contract Act 1872,
enshrined in section 62, which prohibits any variation to the existing terms of the
92
agreement unless it isthrough the conclusion of a new contract.
It appears, however, that the courts in India have not been adopting a uniform
approach while interpreting the relationship between frustration of the contract and
commercial impracticability. For instance, in a more recent judgement, the Appellate
Tribunal for Electricity, New Delhi (the Tribunal), on the contrary invoked section 56
of the Indian Contract Act 1872 to discharge the aggrieved party from its obligations
due to a sudden increase in the price of performance. 93 This was the position in Uttar
Haryana Bijli Vitran Nigam Ltd v Central Electricity Regulatory Corrission, whereby
the Tribunal had the opportunity to hear fifteen appeals that were separated into four
groups, but which primarily concerned the impact of an Indonesian Regulation of a
similar nature to that discussed in Coastal Andhra Power Lirited.94 Moreover, the
parties also stipulated via their force rmjeure clause that they would be discharged if
the performance of their contract was :hindered- and subsequently rendered
commercially impracticable: as a consequence of any other supervening event that was
beyond their reasonable control 9s
While examining whether the suppliers could rightfully invoke the force
rmjeure clause due to the escalation in prices together with a shortage/non-availability
in the supply of coal from Indonesia, the Tribunal relied on the findings of the apex
court in Alopi Parshad 96 and Dhanrajarmal Gobindram 97 and emphasised that it was a
:well-settled principle in law- that a mere increase in prices does not lead to an
impossibility of performance under the contract.98 However, it underscored that due
regard must be given to the wordings of the terms of the clause in the present case.
Appropriately, since the agreement had subsequently become more onerous to perform

91 cf UPICC, art 6.2.3 read along with Brunner (n 12) 3 referring to Lando/Beale, PECL 1999, Comment
D on art 6.111,327.
92 Also see Sree Karmatchi Amnmn Constructions v The Divisional Railway Manager-Works, Palghat

Division, OSA Nos 109 & 247 of 2005, per BanumathiJ, [38]
93 The decision of the Appellate Tribunal for Electricity, decided on 7April 2016.
94 ibid [24].
9s ibid [280] referring to art 12 of the Power Purchase Agreement (PPA).
96
AIR 1960 SC 588.
97
AIR 1961 SC 1285.
9 Thedecision of the Appellate Tribunal for Electricity, decided on 7April 2016 [192].
 Corrrmercial Irmpracticabil ity under the Indian Law of Contract: The UNID ROIT
Principles as the Way Forward?
due to a force rmjeure event, namely the sudden change in the law, it had rendered
performance in the manner that was originally contemplated by the parties impossible
and, thus, constituted :frustration-'withi nthe ambit of section 56 of the Indian Contract
Act 1872. Consequently, the parties were discharged since :the basic premise- of the
contract had been wiped out,99 and they :found themselves6 in a fundamentally
different situation- from what they initially agreed. 100
2. Assessing the Plausible Uses of the UPICC asa Gap-Filler
The Indian Contract Act, 1872 provides no respite to the parties when performance has
merely become more onerous unless it has additionally been rendered impossible
within the parameters of section 56. The Indian law, therefore, mandates the parties to
a contract to delineate specific conditions as the basis of their agreement and
subsequently prove its destruction, before petitioning the court for discharge from the
performance.101 The courts in India have, consequently, been compelled to choose
between two extreme results - namely, either to compel the parties to perform the
contract and thus completely ignore the change in circumstances that have rendered
the performance more onerous, or conversely, permit the parties to be discharged from
their respective obligations. These shortcomings are problematic because it has
permitted the Indian judiciary to override the contractual provisions irrespective of the
parties-' intention to be discharged on account of sudden and unforeseen circumstances,
such as the escalation of prices, under a force rmjeure clause. Consequently, parties
may be prompted to refrain from selecting the Indian law to govern their transnational
commercial contracts. The Indian legal system could, consequently, avoid these
anomalies by relying on the UPICC, which has offered a viable solution to tackle

99 See Satyabrata Ghosev Mugneeram Bangur & Co [1954] SCR 310; and Alopi Parshad, AIR 1960 SC
588, wherein the apex court stressed that the supervening circumstances must destroy the bargain that
the parties have made. AIso see the provisions of the US law of contract on impracticability as enshri ned
in secs 2-615 and 261 of the UCC and Restatement 2d, respectively, read along with official comment 4
and d to the concerned provisions, which similarly stipulates that discharge due to commercial
impracticability will only be permitted if the change in circumstances formed the: basic assumption- on
which the contract was concluded.
100
The decision of theAppellate Tribunal for Electricity, decided on 7April 2016 [289]. Also see British
Movietonews Ltd v London and District Cinemas [1952] AC 166, 185.
101 Also see in this regard sec 2-615 of the UCC; para 313 of the German BGB; andthe English common
law of contract enshrined in FA Trarrplin Stearship Co Ltd vAnglo-Mexican Petroleum Products Co
Ltd[1916] 2 AC 397; Crickl ewood Property and Investment Trust Ltd v Leighton-s Investrment Trust Ltd
[1945] AC 221 (HL); Joseph Constantine Steamship Line Ltdv Imperial Smrelting Corpn Ltd [1942] AC
154 (HL), British Movietonews Ltd. v. London and District Cinemas [1950] 2All E.R. 390 (CA), Davis
Contractors v Fareham Urban District Council [1956] AC 696, Krell v Henry [1903] 2 KB 740, and
Treitel (n 33) 65-66, which similarly determines the impact of hardship on performance, subjectively.
 UC Ljournal of Law andJ urisprudence

sudden and unforeseen changes that have merely rendered the performance of the
contract onerous.
Unlike section 56 of the Indian Contract Act 1872, the UPICC via article 6.2.2
adopts an unambiguous approach by stipulating that a prima facie case of hardship
would be made out as soon as the parties experience a fundamental disequilibrium that
is manifested through an increase or decrease in the value of performance. 102 The
UPICC 's provisions on hardship are consequently applicable regardless of whether the
parties have delineated the basic premise of their contract to be something else.
Moreover, the UPICC is predicated on well-defined standards to assess the
existence of the conditions that may lead to discharge and could therefore plausibly
play a crucial role in the development of the Indian law of contract. The application of
the UPICC-s provisions to cases of commercial impracticability would prove more
desirable for the parties because it would neither compel the disadvantaged party to
fulfil the obligations even when the equilibrium of the contract has been fundamentally
altered, nor would it immediately discharge such aparty from performance. The UPICC
would, instead, keep the contract alive, albeit on modified terms, by entitling the
disadvantaged party to request for the re-negotiation to accommodate to the changed
circumstances. As demonstrated in the discussion above, the UPICC does not entitle
the disadvantaged party to be discharged due to the occurrence of sudden supervening
events except through a :comparatively comprehensive method ,103 this is to say when
the re-negotiation or adaptation of the contract has been proven unfeasible under article
6.2.3(4); or on the determination of force rmjeure under article 7.1.7 of the UPICC.
Consequently, employing the UPICC -s approach with respect to the dichotomy
between the provisions on hardship and force rmjeure would have assisted the Indian
court in cases such as Alopi Parsad,1c4 Coastal Andhra Power Ltd °5 and Uttar Haryana
Bijli Nigarmwherethe parties had undoubtedly experienced hardship and re-negotiation
of the contractual terms was, consequently, feasible. Although the Tribunal adopted a
relatively empathetic approach in Uttar Haryana Bijli Vitran Nigam Ltd 06 by at least
recognising extenuating circumstances of the nature described above, it needlessly
discharged the disadvantaged party when performance was still possible. In such

102 See Girsberger and Zapolskis (n 2) 124-125.

103 Ramberg (n 4) 671.
104
AIR 1960 SC 588.
10
s Decisionof theDelhi HighCourt, OMP No. 267of 2012 (decided on 2J uly 2012).
106 Decision of the Appellate Tribunal for Electricity, decided on 7 April 2016.
 Corrrmercial Irmpracticabil ity under the Indian Law of Contract: The UNID ROIT
Principles as the Way Forward?
circumstances, the Tribunal could have instead adapted the terms of the contract and
altered the equilibrium between the parties by taking into account the changed
circumstances caused by the dramatic inflation in the prices of coal. These
inconsistencies have only arisen due to the narrow precepts within which the Indian
courts have been compelled to interpret section 56 read along with section 62 of the
Indian Contract Act 1872. As seen above, the judiciary has been combining the
determi nation of hardship with force rmajeure by refusing to acknowledge the former
except when it is complemented with the latter.
That being said, the parties to a transnati onal contract may plausibly choose the
UPIC Cas the governing law to avoid these incongruiti es inthe I ndi an approach towards
hardshi p.107 1n other cases, the Indian judiciary may begin on their own moti on employ
the UPICC -s provisi ons on the subject as a gap-fill er to interpret or supplement °8 the
application of section 56 of the Indian Contract Act 1872, to cases of commercial
impracticability, 109 as they have relied upon other provisions of UPICC in a few
instances in the past.110 Employing the UPICC-s favor contractus approach, which
adopts the preference for the fulfilment of an agreement, would provide fair and
adequate redress in such situations by assisting the Indian judiciary in interpreting
precisely how radically changed circumstances can render the contract extremely
onerous, but not as such impossible. The parties would consequently be obligated to
renegotiate the terms in all cases of hardship, the determination of which as such has
been objectively assessed. The utilisation of the UPICC s provisions would further
permit the Indian courts to adapt the contract where necessary and feasi bl e - a power

107 See, UPICC, para 2 to the Preamble, which stipulates that the UPICC :shall be applied when the
parties have agreed that their contract be governed by them7. Also see, (Indian) Arbitration and
Conciliation Act 1996, sec 28(1)(b)(iii), which permits the parties to choose non-state norms such as the
UPICC as the governing law for their transnational arbitration agreement and Saloni K handeria, :Indian
Private International Law vis- -vis Party Autonomy in the Choice of Law- (2018) Oxford University
Commonwealth Law J ournal 1, 13-14, DOI: 0.1080/14729342.2018.1436262, which reports that the
acceptance of the UPICC as thegoverning law in matters of litigation remains to be seen.
108 See U PICC, para 6 of the Preamble.
109 See SE Oil v M/s Gorakharam Gokalchand (1962) 64 Bom L R 113, which clarified that the Indian
Contract Act 1872 is the default legislation that would govern all disputes arising out of domestic
agreements.
110 See the decisions of the Delhi High Court in Sandvik Asia Pvt Ltd v Vardhrman Prorroters Pvt Ltd,
2006 (2) CTLJ 305 Del; and Hansalaya Properties and Another v. Dalrnia Cement (Bharat) Ltd, RFA
(OS) No.26/1986, J udgment pronounced on 20 Aug 2008, where the court relied on the UPICC, arts 4.1,
4.4 and 4.5 to settle the parties- claims. It should be noted that there is no provision in Indian law
permitting such judicial reference to the UPICC, and the courts did not identify the specific legal basis
for their references i n these cases.
 UC LJ ournal of Law andJ urisprudence

which Indian Iegisl ati on does not presently provide the courts with - within the meaning
and scope of section 62 of the Indian Contract Act 1872.111

D. CONCLUSION
Predicated on the English common law, India has demonstrated itself to be the
:staunchest bastion- of pacta suntsurvanda. 112 Such atraditional approach has not been
suitable in resolving the predicaments that may arise in modern-day transnational
contracts, which are often affected by inflation and other circumstances that have the
potential to alter the contracted price of performance to one party-s detriment. This
blind adoption of the principles of the English law on :frustration of contract- have
contributed to the ambiguities prevalent in the Indian legal system, which fails to
provide any reliable standard as regards cost increases vis---vis performance of the
contract It has, therefore, been hard to formulate an exact opinion on the Indian position
on hardship because its courts have failed to maintain a uniform stance in this respect.
The above discussion demonstrates that the general hostility among the
country-s judiciary towards acknowledging any change in circumstances following the
conclusion of the contract unless these have altogether destroyed the basic premise on
which the parties- agreement was founded.113 On the contrary, the Tribunal in Uttar
Haryana Bijli Vitran Nigam Ltd 14 decided to invoke the force rmjeure clause in the
parties- contract when the obligations became more onerous to perform due to a
subsequent increase in the prices. It is,accordingly, submitted that Indian courts should
strongly consider using the UPICC-s provisions on hardship as a gap-filler for
interpreting and developing its law of contract according to internationally acceptable
standards.115 In this respect, the most commendable feature of the UPICC -s sol ution to
hardship or commercial impracticability remains its ability to balance and weigh the
common law-s preference for the rigid adherence to pacta sunt survanda,11 6 with the
flexibility offered by the civil law. 117 At the same time, reference to the UPICC would

"I See Sree Karmatchi Amman Constructions v The Divisional Railway Manager-Works, Palghat
Division, OSA Nos 109 & 247 of 2005 per Bahumati J.
112 Perillo, :Force Majeure and Hardship under the U NID ROIT Principles of International Commercial
Contracts-(n
113
22) 113; andJ oseph M Perillo, Contracts ( 7 h edR WestAcademic Publishing 2014), 487.
See, theverdicts of the Supreme Court in Alopi Parshad, AIR 1960 SC 588; Continental Construction
Co Ltdv State of MP, AIR 1988 SC 1166; Travancore Detaswom BoardvThanath International (2004)
13 SCC 44; and Bharti Cellular Lirnited v Union of India (2010) 10 SCC 174.
114 Decision of the Appellate Tribunal for Electricity, decided on 7 April 2016.
115 See, U PICC, para 6 of the Preamble.
116 See, UPICC, art 6.2.1.
117 ibid arts 6.2.2 and 6.2.3.
 Corrrmercial Irnpracticabil ity under the Indian Law of Contract: The UNID ROIT
Principles as the Way Forward?
enhance the certainty and predictability in the law in India by enumerating the precise
circumstances that constitute hardship or conversely force rmjeure, in an objective
fashion.